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 As PC Sales Turn Down,Intel trims its Outlook

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Posts : 158
Join date : 2012-04-20

PostSubject: As PC Sales Turn Down,Intel trims its Outlook   Sat Sep 08, 2012 11:10 am

SAN FRANCISCO — With the personal computer market stalled, Intel, the primary maker of computer chips, warned its investors Friday that revenue would be lower than expected, as would profit margins.

The company cited weak demand in what had been growing economies, like China.

What Intel sells to manufacturers like Hewlett-Packard and Dell in the third quarter of the year typically ends up on store shelves and office loading docks in the fourth quarter, inside desktop PCs, laptops and computer servers in data centers. If Intel feels pain now, it could signal that PC manufacturers are lowering their expectations for the holiday shopping season or are noticing that their business customers have become cautious.

The slowdown was not unexpected, however, and may not reflect broader economic troubles. The desktop computer market is forecast to shrink this year, as computing becomes a more mobile activity, via laptops, smartphones and tablet computers like Apple’s iPad. Tablets use fewer Intel chips.

Intel said that demand for chips in data centers, which form the cloud-computing powerhouses to which mobile computers connect, was still strong.

Big manufacturers like H.P., while coping with a lower demand for traditional products, are managing their manufacturing more tightly than ever, keeping inventories low while they wait until the last minute to figure out what kind of computers consumers want.

Intel, the world’s largest maker of semiconductors, said its third-quarter revenue would be $13.2 billion, plus or minus $300 million. Its previous forecast has been for revenue of $13.8 to $14.8 billion. Intel also said the worsening market meant its gross profit margins would fall to 62 percent, from an earlier expectation of 63 percent.

“The company is seeing customers reducing inventory in the supply chain versus the normal growth in third-quarter inventory, softness in the enterprise PC market segment and slowing emerging market demand,” Intel said.

The PC market has been weak for much of the year, but until recently analysts had expected a recovery in the last quarter of the year, after Microsoft releases a new version of its Windows operating system, called Windows 8.

Two weeks ago, however, analysts at the International Data Corporation projected that the worldwide PC market would grow by just 0.9 percent this year, to 367 million units. It blamed weaker demand in the usually strong Asia-Pacific market and consumer uncertainty in developed markets.

Intel has fought back against the popularity of tablet computers by investing in a category of very lightweight laptops called ultrabooks. The ultrabooks, which can have both the keyboard of a laptop and a touch screen like a tablet, were expected in large volumes in the market by the middle of this year.

Instead, only a few models have come out, and consumers’ reactions have been tepid. Dell, H.P. and other manufacturers are expected to have many new ultrabooks on the market in coming months.

These products, however, are likely to face a crush of new competition not just from Apple, which may announce a new tablet soon, but Amazon, which on Thursday showed off new models of its Kindle e-readers and tablets. Microsoft is expected to have its own tablet, called the Surface, in late October. Several new models of tablets using Google’s Android operating system are also expected before Christmas.

With all that on the market at once, along with new kinds of smartphones from Apple, Microsoft, Samsung Electronics and others, consumers may just ignore the late-season ultrabooks.

Intel’s problems are “a combination of tablets and a late launch of Windows 8,” said Douglas Freedman, an analyst with RBC Capital Markets. “Ultrabooks should have been out in volume in the first quarter. If you want to fend off the tablet onslaught you don’t try to release products in the third quarter.” He said manufacturers were now uncertain about what products they needed to make.

Among the PC makers, H.P. appeared to have the most to lose from the slowdown Intel was signaling. Meg Whitman, H.P.’s chief executive, spared workers in China from companywide layoffs this year because China was seen as a good growth area. A slowdown there, even as H.P. is facing renewed competition from the Chinese computer maker Lenovo, could affect H.P.’s financial results.

Dell, which sells fewer machines in China, would not be as affected by a slowdown there. Dell has also been making efforts to sell more servers for data centers, which remain an area of market strength.

Both H.P. and Dell declined to comment on changes in their businesses.

Source: http://www.nytimes.com/2012/09/08/technology/intel-downgrades-sales-expectations.html
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